PHILADELPHIA – Credit unions don't have the experience to detect risks when it comes to member business loans, a recent editorial in the Philadelphia Business Journal said. "Most credit unions don't make any business loans now, so why loosen the 12.25 percent limit," read an editorial in the June 17 issue of the newspaper, citing the Credit Union Regulatory Improvements Act of 2005, which, if passed, would let CUs make business loans totaling up to 20% of their assets and wouldn't count any business loan of less than $100,000 toward the cap. The editorial was actually a reprint of one that appeared in the Sacramento Business Journal. "True, banks often turn away pint-sized business loans, or handle them with a credit card. This is where the (SBA) can enter, to midwife small loans with merit…and small-biz loans of any stripe can be riskier than car or individual loans, which are the credit unions' usual purview. Spotting good risks requires evaluations skills most credit unions haven't needed and don't have," the editorial read. Citing SBA stats for fiscal year 2004, the editorial said the agency "guaranteed (more than) $21 billion in credit for small businesses, the most in its history." "The SBA figures don't suggest an urgent need to enlist more credit union capital for the cause," said the editorial. "For credit unions to march further into banking, they should show the move matches their traditional limited purpose, or provides a service banks don't. Or they could start paying taxes and observe the same rules banks do." Pennsylvania Credit Union Association President/CEO Jim McCormack took the offense in a letter to the editor he sent to the Philadelphia Business Journal in response to the editorial. "In reprinting the Sacramento Business Journal editorial about The Credit Union Regulatory Improvement Act of 2005 ("CURIA") in your June 17-23 edition, you accepted several arguments made by the bankers about this piece of legislation without considering the merits of the bill for average small businesses and consumers. Rather than focusing on how credit unions can help provide much needed capital for the smallest of businesses, instead the editorial asserts that there is ample funding for small business expansion and chastises the credit union movement for wanting to enhance its ability to lend to the small business community." McCormack went on to clarify the provisions of CURIA relating to small business lending, pointing out that they "are just a small portion of the overall bill." As for CURIA's MBL-related provisions, McCormack stated that, "It is this latter provision that appears to give the bankers the most heartburn despite the fact that credit unions focus their small business lending on those that are not currently being adequately served by the pool of available lenders. If you took a poll of your non-bank readership, I suspect the vast majority of small business owners would favor credit unions becoming more active in small business lending because they know that credit unions already offer a more consumer friendly, lower cost, low or no fee alternative to banks." He concluded by stating that, "As a publication that targets the entire Philadelphia business community, not just the banks, it is our belief that you should favor CURIA, as will most of your readership."

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